Macy's 2010 Annual Report Download - page 76

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
January 29,
2011
January 30,
2010
(millions)
Balance, beginning of period ..................................... $207 $237
Additions based on tax positions related to the current year ............. 19 23
Additions for tax positions of prior years ............................ – –
Reductions for tax positions of prior years ........................... (8) (34)
Settlements ................................................... (4) (8)
Statute expirations .............................................. (9) (11)
Balance, end of period .......................................... $205 $207
Amounts recognized in the Consolidated Balance Sheets at
January 29, 2011 and January 30, 2010
Other liabilities ............................................ $170 $169
Long-term deferred income taxes .............................. 24 24
Current income taxes ....................................... 11 14
$205 $207
As of January 29, 2011 and January 30, 2010, the amount of unrecognized tax benefits, net of deferred tax
assets, that, if recognized would affect the effective income tax rate, was $133 million and $135 million,
respectively.
The Company classifies unrecognized tax benefits not expected to be settled within one year as other
liabilities on the Consolidated Balance Sheets.
The Company classifies federal, state and local interest and penalties not expected to be settled within one
year as other liabilities on the Consolidated Balance Sheets and follows a policy of recognizing all interest and
penalties related to unrecognized tax benefits in income tax expense. During 2010, 2009 and 2008, the Company
recognized charges of $5 million, $4 million and $16 million, respectively, in income tax expense for federal,
state and local interest and penalties.
The Company had approximately $80 million and $78 million accrued for the payment of federal, state and
local interest and penalties at January 29, 2011 and January 30, 2010, respectively. The accrued federal, state and
local interest and penalties primarily relates to state tax issues and the amount of penalties paid in prior periods,
and the amount of penalties accrued at January 29, 2011 and January 30, 2010 are insignificant. At January 29,
2011, approximately $76 million of federal, state and local interest and penalties is included in other liabilities
and $4 million is included in current income taxes on the Consolidated Balance Sheets.
The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various
state and local jurisdictions. The Company is no longer subject to U.S. federal income tax examinations by tax
authorities for years before 2007. With respect to state and local jurisdictions, with limited exceptions, the
Company and its subsidiaries are no longer subject to income tax audits for years before 2000. Although the
outcome of tax audits is always uncertain, the Company believes that adequate amounts of tax, interest and
penalties have been accrued for any adjustments that are expected to result from the years still subject to
examination.
F-28